Pricecuts & Market Share & Profitability

[misterd]

I suspect MS screwed up by not cutting price this Christmas. I understand their thinking:

1) Sony overpriced the PS3 to the degree that the 360 easily maintained an edge on pricing. It's like getting a price cut without actually cutting the price. Since the PS3 supplies were limited, and sales were likely to be sluggish post-holiday, they probably felt justified in standing pat (and I think sales back them up here).

2) Nintendo overpriced the Wii at $250. That left only a $50 difference between the Wii and the technologically superior 360. Given Nintendo's record the last 2 gens, and the absence of a killer app other than a GCN port, the 360 still looked to be in a strong position. Like the PS3, they expected to see Nintendo sell out for Xmas, and then fall into a normal, slow sales pattern, though in this case because of the target audience rather than price.

Unfortunately for MS the Wii never stopped selling, and the audience largely wrote off the Core system. While the 360 hasn't sold terribly, and is doing better than it's predecessor, it looks to be standing still next to Nintendo.

To be fair, no one, including Nintendo, foresaw the Rise of the Wii. But I suspect if MS had to do things over again, they would have cut the price last holiday. And once the holiday was over, there wasn't much point to cutting price as there were no KA's with which to maximize the PR value.